Lease and Financing terms Glossary

The following are terms commonly used in vehicle leases.


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Acquisition Fee:A fee charged by the leasing company to cover the administrative costs of preparing, approving and administrating the lease. This fee may be paid upfront or included in the capitalized cost.

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Capitalized Cost:The negotiated selling price of a vehicle at lease inception after adding any additional products and subtracting any capitalized cost reductions, such as rebates, trade in allowances and cash reduction.

Capitalized Cost Reduction:The total of any cash payment, trade in allowance or rebate used to reduce the negotiated selling price of a vehicle at lease inception.

Closed-End Lease or Walk Away Lease:NVL leases allow the consumer to return the vehicle at end of lease term with no further financial obligation, provided the lessee has complied with all of the terms of the lease agreement. There may be additional charges according to the terms of the lease for any excess kilometres or excess wear and tear. The consumer will not be responsible for the difference between the residual value and the current market value of the vehicle upon completion of the lease.

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Depreciation:The value the vehicle declines over the term of the lease.

Down Payment:Funds the lessee applies towards the lease reducing the capitalized cost and in turn the monthly lease payment, residual or both. See also capitalized cost reduction.

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Early Termination:Ending a lease before the scheduled termination date. The lessee may be required to pay an early termination charge as set forth in the lease agreement.

Excess Kilometre Charge:A fee charged for each kilometre in excess of the predetermined kilometre allowance as set forth in the lease agreement at time of lease inception. The excess kilometre fee may vary depending upon the type of vehicle leased.

Excess Wear and Tear Charge:An amount that may be collected at lease termination for excess wear and tear to the vehicle that is beyond the allowed terms of the lease.

Excess Wear Assurance:An inexpensive product provided by NVL through the dealer that will protect the Lessee for up to $3500 of excess wear and tear charges at end of lease. Ask your NVL dealer for further details.

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GAP Insurance:This product fills the "gap" between what your insurance company pays if your car is stolen or totaled (written-off) and what you owe the finance company.
For example, if you destroy your $25,000 new car in an accident soon after bringing it home, your insurance company might only pay you $18,000 to replace it because of the depreciation it suffered. In this example, the GAP insurance would pay out the $7,000 difference between your current liability and the amount paid by the automotive insurance company.

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Kilometre Allowance:The total number of kilometres the vehicle may be driven over the term of the lease, without incurring additional costs as agreed at time of lease inception.

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Lease Term:The time period, normally measured in months, which the lease is initially set for.

Lessee:The party entitled to use of the vehicle according to the terms of the lease.

Lessor:The legal owner of the leased vehicle.

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Open-End Lease:A lease with a residual value guaranteed by the Lessee. The Lessee is responsible for either purchasing the vehicle at lease-end or reimbursing the Lessor for any deficiency upon the Lessors disposal of the vehicle. A deficiency could occur if the vehicle market value is less than the residual value.

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Purchase Option:The Lessee’s right to purchase the vehicle from the originating dealer either at the end of the lease or during the term.

Pro Rata or Partial Monthly Payment:This is the partial monthly lease payment (or sometimes referred to as "rent") required to pay for use of the vehicle until the date of your first payment.

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Residual Value:The outstanding book value remaining on the lease at the end of the initial term, as agreed and defined on the lease agreement at inception. Residual values on closed-end NVL leases usually represent an estimate of the fair market value of the vehicle at the end of the initial term. This may also be referred to as the purchase option or lease end buyout.

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Security Deposit:A refundable deposit, usually equal to one monthly payment, which may be collected by the Lessor at the beginning of the lease and held in a non-interest bearing account.

Subvented Lease:A lease that is subsidized by the vehicle Manufacturer or Dealership, and usually reflects reduced interest rates.

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Trade-up:Upgrading your currently leased vehicle to a newer vehicle. Contact your originating dealer for further details.

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Wear and Tear Charges:Fees that may be charged to the Lessee upon return of the vehicle to the Lessor for excess wear and tear items that are deemed to be beyond normal usage of a vehicle. Specifics are communicated through brochures, contract details, or letters prior to the end of lease.

NVL - Automotive Leasing and Financing